What is Non-banking financial Company (NBFC)?
Non-banking Financial Companies (NBFCs) are financial institution registered under Companies Act 2013 or 1956. NBFC is engaged in various financial services but does not possess a banking license.
NBFC deals in Loans and Credit Facilities, Assets Financing, Acquisition of Shares, Stock, Bonds, Hire-Purchase, Insurance, Currency Exchange, Peer to Peer Lending, hedge funds etc.
NBFCs are not allowed to engage in any other business activity other than financing and investment. They help to meet the demand that remains unfulfilled by the traditional banking system in shorter processing time. NBFCs are registered and regulated by the reserve bank of India under Section 45(1A).
Willing to know how to register an NBFC. Please fill up the form below so you can speak to an expert on the NBFC registration process.
NBFC registration In India – An Overview
You can register an NBFC in India in 90 to 120 Working days and start your finance business.
New NBFC registration is highly recommended over the NBFC takeover. NBFC registration has several steps not limited to Quality of Capital test, Business Plan, Profile Assessment, Experience in finance, Business Eligibility test and Public interest concern of the Regulator. If you can qualify all together, Cor may be issued by the Department of Non-Banking Regulation.
We shall assist you in NBFC company registration, NBFC Fintech Business Plan, NBFC Software, CISA Audit and end to support in registering and managing NBFC business In India.
- Profile Assessment Test
- NBFC Company Registration
- High-Level Business Plan
- Online Application Filing
- RBI Questions/clarification
- Final Decision on COR
- Business Commencement
- On-Going Compliance
Why Choose NBFC Registration India- Benefits of NBFC License
Financing business in India is highly regulated by the Reserve bank of India. Hence NBFC registration offers many benefits. A Registered NBFC allows to gain the confidence of borrowers, offers you the security of capital invested in the business.
- Low-Cost NBFC Registration Process
- Protection of Personal Liability of the Owner and protects from other legal and business risk.
- Attracts more borrowers
- Easy to Raise Investments in NBFC
- Access of CIBIL – Borrowers be afraid of poor credit score and Hence lowest Default
- Open Interest Rate without any Cap
- Free to charge Processing Fees – No Cap
- Protection by Law for recovery of loan
- Easy Bank Finance
- Up to 100%, FDI Allowed
- Quick Loan Processing
- Soft Eligibility Criteria
- Fewer Rules and Regulations
- Loan, Investments and Assets financing in one Single License
- Record Growth in retail Loan 46% in 2018
- All India Coverage – With NBFC License you can operate All Over India, no need to seek Any approval from the local authority.
- NBFC Can open to 1000 Branches without any additional approval from RBI
- NBFC Can Appoint DSA Agents
Checklist for NBFC Registration in India
According to Section 45(1A) of the Reserve bank of India for any company to register as NBFC, the below conditions must fulfil.
At least 1/3 of Directors must have experience in Finance.
Unique Business Plan
The company must have a detailed business plan for the next 5 years
The Shareholders in total, Must have Rs. 2 Cr as a net owned fund, Invested Capital must not be the borrowed fund. A gift from Spouse is considered as an Owned fund.
Clean Credit History
The Directors and Shareholders must have no write-offs or have not willfully defaulted the repayment of loans to NBFC/Bank.
Experienced NBFC Advisor
Registering an NBFC as well as meeting the Regulatory compliance requires expert knowledge. Hence you may need to hire an experience NBFC Consultants to take care of NBFC Registration and Compliance after Cor.
How to Apply for NBFC License? - A detailed Registration process
Non-banking Finance companies play a vital role in fulfilling the credit gap created by the banks, and further NBFC provides quick loan by use of better technology as compared to the banks.
The Ministry of Corporate affairs governs NBFC registration Process with rules and regulations of the Reserve bank of India issued from time to time.
Hire Experienced NBFC Consultants (CA/CS/Lawyers/Ex-Banker – Suggested Consultant Team Size Should be more than 100+)
Qualify Eligibility Test - NBFC Advisor is expected to conduct the eligibility test keeping in mind of RBI Act and Based on his experience.
Company Registration (With Authorize share Capital Rs. 2.5 Crore recommended), Open Bank Account & Apply for GST No.
Auditor Appointment – RBI Expects that Auditor must have knowledge of RBI Act and experience in NBFC audit
Constitute Board of Directors (Right Composition of Board secures NBFC License easily as RBI Approves Cor only in the interest of Public)
Select Right Category and Customer Interface Option
Create High-Level Business Plan With the help of NBFC Consultants. Fintech Based Business model recommended
Infuse Capital Rs. 2 Cr & Create Fixed Deposit of Rs 2 cr
Application review by the Expert
File Online Application (Cosmos)
Submit Physical Application to RBI Office
Be Proactive to respond to the RBI Clarification/Questions
RBI Communicates Final Decision on Cor Within 90 to 120 Days
File Commencement of Business to RBI within 6 Months from the date of grant of NBFC License
Comply NBFC Regulations, RBI Directions issued from time to time
What are the Roles and Functions of an NBFC?
An NBFC can provide both secured and unsecured loans to the takers based on alternative lending models. The government has been promoting NBFC so that the unorganized money lenders and people willing to run financial services can organize their lending operations.
NBFCs play a significant role in conducting financial services in the Indian economy. NBFC in India has undergone too many transformations in recent years. At present, most of the NBFC Start-ups have adopted the high-end tech-based business model.
These NBFCs are working actively to promote financial inclusion & as well aggressively complementing the banking sector.
- NBFC creates a favourable balance in addressing the financial needs of the country, where a large number of applicants are turned down by traditional Banks of India.
- NBFC provides loans based on alternative credit scoring model to assess the loan application.
- Indian Fintech Start-ups have been using NBFC model to offer financial services.
- Credit growth of registered NBFCs is recorded at 24.3% per year as against 21.4% for banks.
Documents Required for NBFC Registration
Certified Copy of Registration Certificate
Obtain a Certified copy of Certificate of Incorporation (COI), MOA & AOA from the Regional registrar of companies
Need updated KYC & Income proof of Directors and Shareholders
Net worth Certificate
Collect updated net worth certificate of Directors, Shareholders, and Company
Clean Banker Report
Need to Obtain a Banker report about the no Lien remark on the Initial Fixed deposit of Rs 2 Cr.
Proof of educational/professional qualification of the directors of the Applicant company
Credit report of Directors and shareholders
Latest credit reports of directors and shareholders are required.
Experience in the Financial sector
Submit at least one Director's profile with 10+ years’ experience in the financial services sector
Submit a detail action plan about the loan products, fair practice code, credit and risk assessment policy.
Need to provide organizations structure and decision-making process for approval/rejection of a loan application
System and IT Policy
Submit Information technology policy
Who regulates NBFC Registration Process?
The founders are required to follow both online as well offline NBFC application process to obtain the NBFC license. The Reserve bank of India is an autonomous body, and it has two departments to regulate and supervise the function of the Non-Banking financial companies
DNBR (Department of Non-banking Regulation)
The DNBR is responsible for conducting the Fresh NBFC Registration process as well for preparing the regulation for the NBFC. The DNBR has transparent as well innovative assessment process of NBFC Application
- Assessment of Application Submitted for NBFC License (All Category of NBFC)
- Investigation of Directors / Shareholders Profile
- Communication with Applicant Company in Pre-Registration Process
- Communicates Final Decision to the applicant company with the Approval of Executive Director office (RBI)
- Regulates & Administer NBFC Business in India
- Publish Notifications, Circular & Order for NBFC.
DNBS (Department of Non-Banking Supervision)
DNBS is responsible for the post-registration supervisory role and handling other administrative issues about NBFCs. DNBS operates Regionally as well operates from a central office in Mumbai. After Approval from DNBR, you can expect further communication from DNBS.
- After Approval from DNBR (Department of Non-banking Regulation) collects Net owned certificate & Bankers Report – before they issue you the NBFC License (Cor) in Original
- Responsible for Complying the NBFC Rules and Regulations issued by the RBI
- Conduct Audit / On-site Inspection from Time to time
- Communicates with NBFC for all On-going compliance
- Suspend / Cancel NBFC License in case of Non-Compliance with the Laws
- Educate and Conduct seminar for the general awareness about the NBFC Regulations, Compliance and Business.
What are the Types of NBFC in India?
There are two categories of NBFC. These are distinguished on activities in operation as well as on the authorization to take deposits.
NBFC Based on the Authorization to Take Deposits
- The Deposit Taking NBFC (Type -1)
- Non-Deposit accepting NBFC (Type -2)
NBFC Based on their Activities
- Non-Banking Financial Company – Investment and Credit Company (In a recent development, RBI has merged Asset Finance Companies, Investment Companies and Loan Companies into a single category)
- Infrastructure Debt Fund (IDF-NBFC)
- Non-Banking Financial Company – Factors (NBFC-Factors)
- Peer to Peer Lending Marketplace.
- Infrastructure Finance Company.
- Core Investment Company.
- Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI)
- Mortgage Guarantee Company.
- Housing Finance Company
- Chit Fund Company
- Mutual Benefit Finance Company
- Core Investment Company
What are the NBFC Registration Requirements?
Before the NBFC filing there are specific pre-registration requirements for registration of NBFC:
- Register a Company as per Companies Act 2013
- Arrange Capital of Rs. 2 Crore (Minimum capital requirement for an NBFC)
- Create a Fixed Deposit of Rs 2 CR
- FDI Compliance as per FEMA Act - In the case of foreign investment
- Complete documentation for an NBFC license
- Submission of necessary documents with FD receipt before RBI
What are the Support Services from Enterslice after Certificate of Registration from the RBI?
- Advisory for Fintech Based Credit Assessment model
- Assistance in the SOP of the Organization
- Assistance in designing loan product
- Finalizing reporting formats from various verticals of the organization
- Guidance on Digital Financial Services Marketing
- Assistance in developing Company Policies
- Development of High-Level Business Plan & Investor Deck
- Helping founders in preparing to go to market strategy
- Assistance in the fundraising process via FDI Automatic route
- Assistance in meeting secretarial compliances
- Assistance in meeting RBI Compliance
- Advisory on Adoption of Ind-AS
- Internal Audit Services
What are the NBFC Registration Fees?
For NBFC registration, there is a requirement of minimum capital of Rs. 2 cr; therefore, an applicant needs to register a company with the prescribed capital along with the requisite government fees.
What are the NBFC compliances after COR?
There are certain compliances to meet after the completion of the NBFC Registration Process. Additionally, they need to follow the RBI Act, RBI Guidelines, Circulars, and notifications published in the public domain from time to time.
NBFC RBI Compliance
- Adoption of Fair Practice Code
- Cosmos Registration
- FIU-IND Registration
- CIC Registration
- C-KYC Registration
- CERSAI Registration
- Filling of NBS-9 by use of Online Platform of RBI (COSMOS)
- Secretarial compliances
- Compliance of KYC Anti-money Laundering
NBFC General Compliance Requirement
- Appointment of Statutory Auditor (CA having 5+ years of experience)
- Statutory Audit
- Tax Audit.
- GST Return Filing
- Income Tax Return filing
- ROC Returns
- Any other Compliance / Returns required by the Competent Authority
NBFC Registration vs. NBFC Takeover
Applying for new NBFC Application is always a better option than a takeover of existing ones. The registration of NBFC is simpler than before. This is especially for Foreign Companies, who intends to enter into the Indian Financial service market.
We always advise them to apply for the new NBFC registration Application instead of buying existing NBFC.
Advantages of Fresh NBFC Registration above NBFC Takeover
Low Legal Risk
In case of NBFC takeover, any past Non-compliance with RBI Act may lead to cancellation of the NBFC License.
Fresh NBFC Registration can be completed in a period of 90 to 120 days whereas an NBFC Takeover usually takes 5 to 9 Months.
There is no title risk of Ownership after new registration of NBFC. You are the 1st shareholder of the company at another side in acquiring an existing NBFC. You will not be able to establish the precise title of shares.
Entities are responsible for a tax liability of existing NBFC they are willing to take over.
In case of new NBFC License application, you may need to block your Rs. 2 Cr / Rs. 20 Million FD in Bank Account. However, the proposed shareholders are required to submit the Bankers report in a case of the NBFC takeover. The report states that the Bank Balance is equivalent to the book value of the shares.
How Enterslice will help you to get NBFC registration
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